Correlation Between Korea Information and Kolon Life
Can any of the company-specific risk be diversified away by investing in both Korea Information and Kolon Life at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Korea Information and Kolon Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Information Communications and Kolon Life Science, you can compare the effects of market volatilities on Korea Information and Kolon Life and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Korea Information with a short position of Kolon Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Information and Kolon Life.
Diversification Opportunities for Korea Information and Kolon Life
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Korea and Kolon is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Korea Information Communicatio and Kolon Life Science in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolon Life Science and Korea Information is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Korea Information Communications are associated (or correlated) with Kolon Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolon Life Science has no effect on the direction of Korea Information i.e., Korea Information and Kolon Life go up and down completely randomly.
Pair Corralation between Korea Information and Kolon Life
Assuming the 90 days trading horizon Korea Information Communications is expected to generate 0.56 times more return on investment than Kolon Life. However, Korea Information Communications is 1.79 times less risky than Kolon Life. It trades about -0.02 of its potential returns per unit of risk. Kolon Life Science is currently generating about -0.03 per unit of risk. If you would invest 895,000 in Korea Information Communications on September 12, 2024 and sell it today you would lose (103,000) from holding Korea Information Communications or give up 11.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Korea Information Communicatio vs. Kolon Life Science
Performance |
| Timeline |
| Korea Information |
| Kolon Life Science |
Korea Information and Kolon Life Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Information and Kolon Life
The main advantage of trading using opposite Korea Information and Kolon Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Information position performs unexpectedly, Kolon Life can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Kolon Life will offset losses from the drop in Kolon Life's long position.| Korea Information vs. Cube Entertainment | Korea Information vs. Dreamus Company | Korea Information vs. LG Energy Solution | Korea Information vs. Dongwon System |
| Kolon Life vs. Seoul Electronics Telecom | Kolon Life vs. Korea Information Communications | Kolon Life vs. Han Kook Steel | Kolon Life vs. Hankuk Steel Wire |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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